Vincent D. Mattera, Jr., President and Chief Executive Officer, said “Our second fiscal quarter results reflect our strategy and the results of our efforts to address the growing market opportunities we are seeing, including those in the communications markets. Company margin expansion is being driven by volume and manufacturing efficiencies. With a book to bill ratio of 1.18, we anticipate the momentum we are currently experiencing to continue through the second half of fiscal year 2017.”

Table 1

$ Millions, except per share amounts and %

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

Increase

2016

2016

2015

2016

2015

(Decrease)

Bookings (1)

$

274.3

$

244.3

$

207.7

$

518.6

$

394.9

31

%

Revenues

$

231.8

$

221.5

$

191.5

$

453.3

$

380.7

19

%

Net earnings

$

23.9

$

16.3

$

19.0

$

40.2

$

36.2

11

%

Adjusted net earnings (2)

$

31.5

$

22.5

$

19.0

$

54.0

$

36.2

49

%

Diluted earnings per share

$

0.37

$

0.26

$

0.30

$

0.63

$

0.58

9

%

Adjusted diluted earnings per share (2)

$

0.49

$

0.35

$

0.30

$

0.84

$

0.58

45

%

Other Selected Financial Metrics

Gross margin

40.7

%

39.5

%

37.3

%

40.1

%

37.4

%

270 bps

Return on sales

10.3

%

7.4

%

9.9

%

8.9

%

9.5

%

(60 bps)

Adjusted return on sales (2)

13.6

%

10.2

%

9.9

%

12.0

%

9.5

%

250 bps

(1) Bookings are orders the Company expects to convert to revenues within the next twelve months.

(2) Fiscal year 2017 excludes the expenses associated with the Company’s acceleration of its investment in the new technology platform to increase its capability to produce new optoelectronic devices. See Tables 7 and 8 for Reconciliations of Reported Earnings to Adjusted Earnings.

As discussed below under “Use of Non-GAAP Financial Measures,” the Company is presenting certain non-GAAP financial measures in this release. Investors should consider non-GAAP adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with generally accepted accounting principles ("GAAP"). Please refer to the attached schedules for the applicable GAAP to non-GAAP reconciliations.

Outlook

The outlook for the third fiscal quarter ending March 31, 2017 is revenue of $234 million to $244 million and diluted earnings per share of $0.31 to $0.36. The additional expenses associated with the acceleration of the Company’s investment in the new technology platform in the third fiscal quarter are expected to be around $0.11 per share. These amounts are calculated using prevailing exchange rates. The results for the quarter ended March 31, 2016 were revenues of $205.1 million and diluted earnings per share of $0.24 which included acquisition transaction expenses and other one-time transactions. As discussed in more detail below, actual results may differ from these forecasts due to various factors including, but not limited to, changes in product demand, competition and general economic conditions.

Segment Information

Operating income is defined as earnings before income taxes, interest expense and other expense or income, net.

Table 2

Segment Bookings, Revenues, Operating Income and Margins

$ Millions, except %

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2015

2016

2015

Bookings:

II-VI Laser Solutions

85.0

80.6

66.4

165.6

135.5

II-VI Photonics

136.1

104.6

97.5

240.7

162.7

II-VI Performance Products

53.2

59.1

43.8

112.3

96.7

Total bookings

$

274.3

$

244.3

$

207.7

$

518.6

$

394.9

Revenues:

II-VI Laser Solutions

$

81.5

$

79.3

$

70.2

$

160.8

$

141.8

II-VI Photonics

100.9

95.8

74.3

196.7

146.2

II-VI Performance Products

49.4

46.4

47.0

95.8

92.7

Total revenues

$

231.8

$

221.5

$

191.5

$

453.3

$

380.7

Operating Income:

Adjusted II-VI Laser Solutions (1)

$

17.2

$

14.3

$

11.2

$

31.5

$

23.4

New IR&D technology platform investment

(9.6

)

(7.6

)

-

(17.2

)

-

Consolidated II-VI Laser Solutions

$

7.6

$

6.7

$

11.2

$

14.3

$

23.4

II-VI Photonics

15.9

13.9

7.4

29.8

13.7

II-VI Performance Products

3.6

3.1

3.1

6.7

6.4

Total operating income

$

27.1

$

23.7

$

21.7

$

50.8

$

43.5

Adjusted Operating Income (1)

$

36.7

$

31.3

$

21.7

$

68.0

$

43.5

Operating Margin:

Adjusted II-VI Laser Solutions (1)

21.1

%

18.0

%

16.0

%

19.6

%

16.5

%

II-VI Laser Solutions

9.3

%

8.4

%

16.0

%

8.9

%

16.5

%

II-VI Photonics

15.8

%

14.5

%

10.0

%

15.1

%

9.4

%

II-VI Performance Products

7.3

%

6.7

%

6.6

%

7.0

%

6.9

%

Total operating margin

11.7

%

10.7

%

11.3

%

11.2

%

11.4

%

Adjusted total operating margin

15.8

%

14.1

%

11.3

%

15.1

%

11.4

%

(1) Fiscal year 2017 excludes the expenses associated with the Company’s acceleration of its investment in the new technology platform to increase its capability to produce new optoelectronic devices. See Tables 7 and 8 for Reconciliations of Reported Earnings to Adjusted Earnings.

GAAP net earnings and GAAP diluted earnings per share are included in Table 1 on page 1. Tables 3 through 5 reconcile adjusted numbers to the GAAP reported numbers.

Table 3 is a reconciliation of Operating Income reported in this press release to reported Net Earnings.

Table 3

$ Millions

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2015

2016

2015

Adjusted operating income (2)

$

36.7

$

31.3

$

21.7

$

68.0

$

43.5

New IR&D technology platform investment (2)

(9.6

)

(7.6

)

-

(17.2

)

-

Operating income

$

27.1

$

23.7

$

21.7

$

50.8

$

43.5

Interest expense

1.4

1.2

0.6

2.6

1.2

Other expense (income), net

(6.1

)

(1.4

)

(1.1

)

(7.5

)

(2.1

)

Income taxes

7.9

7.6

3.2

15.5

8.2

Net Earnings

$

23.9

$

16.3

$

19.0

$

40.2

$

36.2

Table 4 is a reconciliation of Operating Income reported in this press release to adjusted EBITDA.

Table 4

$ Millions

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2015

2016

2015

Operating income

$

27.1

$

23.7

$

21.7

$

50.8

$

43.5

Depreciation and amortization

14.9

14.9

13.8

29.8

27.1

Other income (expense), net

6.1

1.4

1.1

7.5

2.1

New IR&D technology platform investment (2)

9.6

7.6

-

17.2

-

Adjusted EBITDA (1)(2)

$

57.7

$

47.6

$

36.6

$

105.3

$

72.7

Table 5 is a reconciliation of EBITDA reported in this press release to reported Net Earnings.

Table 5

$ Millions

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2015

2016

2015

Adjusted EBITDA

$

57.7

$

47.6

$

36.6

$

105.3

$

72.7

Adjusted EBITDA margin (1)(2)

24.9

%

21.5

%

19.1

%

23.2

%

19.1

%

New IR&D technology platform investment (2)

(9.6

)

(7.6

)

-

(17.2

)

-

EBITDA

48.1

40.0

36.6

88.1

72.7

EBITDA margin (1)

20.8

%

18.1

%

19.1

%

19.4

%

19.1

%

Interest expense

1.4

1.2

0.6

2.6

1.2

Depreciation and amortization

14.9

14.9

13.8

29.8

27.1

Income taxes

7.9

7.6

3.2

15.5

8.2

Net Earnings

$

23.9

$

16.3

$

19.0

$

40.2

$

36.2

(1) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.

(2) Fiscal year 2017 excludes the expenses associated with the Company’s acceleration of its investment in the new technology platform to increase its capability to produce new optoelectronic devices. See Tables 7 and 8 for Reconciliations of Reported Earnings to Adjusted Earnings.

Table 6 is a table of other selected financial information.

Table 6

$ Millions, except share information

(Unaudited)

Three Months Ended

Six Months Ended

Dec 31,

Sept 30,

Dec 31,

Dec 31,

Dec 31,

2016

2016

2015

2016

2015

Share-based compensation expense

$

3.9

$

4.1

$

3.7

$

8.0

$

7.6

Cash paid for shares repurchased through the Company’s share repurchase program

$

-

$

-

$

0.4

$

-

$

6.3

Shares repurchased through the Company’s share repurchase program

-

-

25,200

-

380,538

Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, January 24, 2017 to discuss these results. The conference call will be broadcast live over the internet and can be accessed by all interested parties from the Company's website at www.ii-vi.com as well as at http://tinyurl.com/jlzbgg2. A replay of the webcast will be available for two weeks following the call.

Use of Non-GAAP Financial Measures

The Company has disclosed adjusted financial measurements in this press release that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company's management uses these measurements as an aid in monitoring the Company's on-going financial performance. The adjusted non-GAAP net earnings and adjusted non-GAAP earnings per share measure the earnings of the Company, excluding non-recurring or unusual items that are considered by management to be outside of the Company’s standard operations. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance that items excluded from the non-GAAP financial measures will not occur in the future, or that there could be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

About II-VI Incorporated

II-VI Incorporated, a global leader in engineered materials and optoelectronic components and devices, is a vertically integrated manufacturing company that develops innovative products for diversified applications in the industrial, optical communications, military, life sciences, semiconductor equipment, and consumer markets. Headquartered in Saxonburg, Pennsylvania, with research and development, manufacturing, sales, service, and distribution facilities worldwide, the Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms including integrated with advanced software to enable our customers.

Forward-looking Statements

This press release contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company's performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties, which could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it in this release have a reasonable basis, but there can be no assurance that management's expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other "Risk Factors" discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2016; (iii) the purchasing patterns of customers and end-users; (iv) the timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the Company's ability to assimilate recently acquired businesses, and risks, costs and uncertainties associated with such acquisitions; and/or (vii) the Company's ability to devise and execute strategies to respond to market conditions. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.